Linkage fee debate: Local small businesses need support

The San Diego City Council’s recent increase of the so-called “linkage fee” — also known as the “workforce housing offset fee” — has sparked a campaign to overturn the fee hike. The fee was originally adopted in 1990 to help pay for affordable housing on the theory that new development means more workers and a need for more low-cost housing. Business leaders and small business owners say it’s a jobs-killing tax and hope to gather enough signatures to put the issue to voters on the June ballot. Affordable housing advocates say there is an extreme shortage of low-cost housing available to working families. Here is one view on the issue.

A narrow 5–4 majority of the San Diego City Council voted to increase my taxes by 377 percent.

I know, I didn’t believe it at first, either.

As a small-business owner, I’m the person the government claims is the backbone of our local economy, the person trying to provide well-paying jobs for my fellow San Diegans. So why would the City Council vote to increase my taxes by 377 percent?

An Opposing Point of View

Apparently, it’s also my job to provide subsidized housing. That is the argument made by the supporters of this tax increase. They call it a “linkage fee” or a “workforce housing offset” — classic government-speak for something I am forced to pay in order to expand my business in San Diego. That is what we common folk call a “tax,” or more specifically in this case, a “jobs tax.” It’s a jobs tax because it kills new job opportunities.

Here’s how it works in San Diego: Commercial properties are charged a “fee” on a square-foot basis. That money is supposedly used to help build subsidized housing units, under the premise that new commercial buildings create jobs that don’t pay a high-enough salary to cover housing costs and therefore require a private subsidy. The fee is paid on all commercial properties including nonprofits, hospitals and churches — there are no exemptions. This fee also is unique to San Diego. No other city in San Diego County assesses this tax.

For an industrial building such as mine, the rate is currently $0.64 per square foot. On Nov. 4, the City Council raised it to $3.05 per square foot, an increase of 377 percent. Amazingly, the tax increase is even higher — up to 744 percent — for other types of commercial buildings.

In hard dollars, that means the 30,000-square-foot building I wanted to construct to expand my business just increased by $72,300. It’s a cost I cannot pass onto a tenant. I am the tenant. This additional cost — this tax increase — must now be accounted for in my business plans and paid up front if I expand. In other words, it’s not a cost I’m allowed to finance.

Through hard work and fiscal discipline, I have gradually grown my business and now employ 13 hardworking people. While that may sound inconsequential to some, 13 San Diego families depend on my business for their way of life and I take that responsibility seriously.